More of our business customers are using electronic signatures when signing their paper checks. In the past, for facsimile signatures, we have had our business customers stamp the signature card and the resolution authorizing us to accept the facsimile signature with the actual facsimile stamp. What are we supposed to do for electronic signatures?

We recommend including customers’ electronic signatures on their signature cards and resolutions authorizing you to accept electronic signatures. We also recommend reviewing your account agreements to ensure that they allow you to charge your customers for checks that they have signed electronically.

Under the Illinois Uniform Commercial Code (UCC), banks may charge their customers for items that are properly payable — meaning authorized and in accordance with any agreement between the customer and bank. Additionally, the UCC allows a check drawer’s signature to be made “manually or by means of a device or machine,” which we believe allows for electronically-signed checks.

Consequently, if your account agreements allow you to accept electronic signatures on your customer’s checks, we believe checks containing such signatures would be considered “properly payable” and subject to the same liability rules for unauthorized transactions as a check signed by any other acceptable means. We recommend requiring customers to include the electronic signature on their signature cards and resolutions authorizing the use of the electronic signature so that you can verify the electronic signature.

Additionally, we believe your bank may accept a customer’s electronic signature on a signature card and resolution in place of a wet ink signature. Both Illinois and federal law generally provide that an electronic signature may not be denied legal effect or enforceability solely because it is in electronic form.

For resources related to our guidance, please see:

Illinois UCC, 810 ILCS 5/4-401(a) (“A bank may charge against the account of a customer an item that is properly payable from that account even though the charge creates an overdraft. An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and bank.”)

Illinois UCC, 810 ILCS 5/3-401(a) (“A person is not liable on an instrument unless (i) the person signed the instrument, or (ii) the person is represented by an agent or representative who signed the instrument and the signature is binding on the represented person under Section 3-402.”)

Illinois UCC, 810 ILCS 5/3-401(b) (“A signature may be made (i) manually or by means of a device or machine, and (ii) by the use of any name, including any trade or assumed name, or by a word, mark, or symbol executed or adopted by a person with present intention to authenticate a writing.”)

UCC Official Comments, Section 3-401, Comment 2 (“A signature may be handwritten, typed, printed or made in any other manner. . . .”)

Electronic Signatures in Global and National Commerce (ESIGN) Act, 15 USC 7001(a)(1) (“A signature, contract, or other record . . . may not be denied legal effect, validity, or enforceability solely because it is in electronic form.”)

Uniform Electronic Transactions Act, 815 ILCS 333/7(a) (“A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.”)

Uniform Electronic Transactions Act, 815 ILCS 333/7(b) (“A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.”

Uniform Electronic Transactions Act, 815 ILCS 333/7(c) (“If a law requires a record to be in writing, an electronic record satisfies the law.”)

Uniform Electronic Transactions Act, 815 ILCS 333/7(d) (“If a law requires a signature, an electronic signature satisfied the law.”)